Wednesday, July 23, 2008

Financial Tsunami Update

"Your friends tell you what you need to hear, not what you want to hear."

While there are many analogies to describe our worldwide financial crisis, "
tsunami" seems most appropriate. Tsunamis are caused by earthquakes or structural shifts that have been a long time building, they appear rapidly and seemingly out of nowhere, they catch most people unawares, and they cause massive, long-lasting devastation. If the survivors are lucky, they will get help to bury the dead, clean up the mess and rebuild from other, unaffected parties. If they are unlucky, they will be left to rebuild on what's left of their resources.

The current financial tsunami had its origins in the creation of the Federal Reserve Bank in 1913. Since then, the explosion of fiat currency has reached the point where today's dollar is worth approximately 2-cents compared to what it was then (as measured by the price of gold). A $20 gold piece would buy a good man's suit back then. It still will today. (I guess today when I give people my opinion, I ought to tell them it is my "dollar's worth!" -- Rim shot!)

There's still time for you to get you and your family to higher financial ground. See earlier posts for more practical advice.

Jim Puplava's blockbuster
interview with Bud Burrell about institutional financial crimes is a real eye-opener. Criminals of high finance are raping the savings and businesses of American citizens. They're dealing with hundreds of billions of dollars and are extremely well-connected. You've probably never heard this story. I handn't. Burrell maintains half the value of Americans' retirement accounts has been stolen using these methods.

Jim Cramer of CNBC has told his viewers "
Sell everything. Nothing's working." The always bullish Cramer is now a bear. "In 25 years on Wall Street, I have never seen things this bad." Interestingly, Cramer is mentioned in the Burrell interview above. JP Morgan's CEO says prime mortgages look "terrible," and says even though they wrote off $104 million in loan losses in the second quarter, "We're very early in the loss curve."

Famed investor
Jim Rogers said on CNBC (remarkably) that it is a terrible mistake to bail out Fannie Mae and Freddie Mac. In 240 years the debt of the US government reached $5 trillion. Paulson's proposal to bail out F & F will double the debt to $10 trillion!

Reuters reports that US economic authorities' confidence in their own ability to rescue the country from the spreading financial panic is at the lowest level yet. "You see a massive potential for financial meltdown on a global scale," says one analyst. Another analyst from the same firm estimated more than 300 US banks could fail in the next three years, double the February estimate.

Bob Chapman calls it "
A Complete and Systemic Breakdown." The IndyMac failure was the largest bank failure in the last 23 years, and wiped out 10-20% of the FDIC's meager reserves that insure the entire banking system! His must-read analysis will help your lethargic brother-in-law break out of his stupor and get serious about taking defensive actions. The value of the US dollar will be inflated much more as the figurative printing presses work overtime to flush the system with liquidity to keep it afloat.

If your savings are in dollar-denominated assets, you had better make sure they are backed by something of real value, like gold, silver or well-chosen real estate. Oh, and check your bank's strength at This is a hot time of year to join those lines of depositors trying to get their money out of a failed bank.

Gary North pointed out in his Remnant Review that we saw "the classic mark of panic in high circles" last week when Bush held a hastily called press conference last Tuesday to tell Americans to remain calm. "When the President of the United States has to hold a press conference to get a sound bite for the evening news, and this sound bite is for the public to remain calm, there's panic in the White House."

European countries are suffering from the effects of their own real estate crashes. The
U.K.'s Telegraph reported that "Spain's finance minister Pedro Solbes has stunned the markets with an admission that his country faces the worst economic crisis in its history as the full effects of the property crash spread through the economy."

Jim Willie writes the excellent, comprehensive financial "
Hat Trick Letter". His latest issue discusses a myriad of aspects of the tsunami. He lists a number of major US industries that are on the path to nationalization, as well as the triage procedures used by the Fed and Treasury to determine which institutions die and which are too big or well-connected to fail. If you want to stay abreast of what's happening, I strongly suggest you subscribe.

Jim Kunstler's blog has a needlessly offensive title with some incisive analysis. "
Not Your Grandma's Depression" makes his case why the coming depression will be much worse than that of the 1930's. William Thompson, Chairman of Private Capital, Hong Kong also tells why this depression will be the worst since the one we call "Great" in this interview. [World War I was called "The Great War," until World War II came along. Maybe we're facing "World Depression II."] Thompson gives some good advice for protecting your savings, including avoiding US Treasury debt.

Baby Boomers face a "
financial Armageddon" because the Social Security and Medicare systems will go bankrupt when 77 million tax-paying baby boomers become 77 million check recipients. Isn't there a Trust Fund accumulating all the surplus of contributions left after distributions? Not exactly. You see, all those surpluses were lent to the politicians to fund their vote-buying programs, replacing the cash in the fund with government bonds. Where will the government get the cash to redeem those bonds to pay out benefits when the "surplus" revenues are needed in the future? They'll have to create even more "money" out of thin air. There goes what will be left of value in the dollar at that time. Everyone seems to know about this problem, but no politician wants to take the painful steps to fix it.

Speaking of inflation,
Doug Casey's latest graph shows the Producer Price Index in both the US and Canada foretelling much higher inflation in the Consumer Price Index. And, remember, this is using faked government statistics designed to understate actual inflation.

Think we should drill more oil to increase supply to lower prices? The Democrats don't.
According to Senator Maria Cantwell, the nanny-state Dems want to "wean" us off of oil.

David McAlvaney's podcast further elucidates the financial challenges we face. And Martin Weiss talks about the government's faked statistics that hide the true state of financial affairs. He also sees deepening depression accompanied by runaway inflation.

Ambrose Evans-Prichard says "
The Global Economy is in Maximum Danger."

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